Attorneys for Tycoon Predict Conviction
By Peter Finn
Washington Post Foreign Service
Wednesday, April 27, 2005
MOSCOW, April 26 -- Mikhail Khodorkovsky, the former oil tycoon, is to soon hear a verdict that will likely close out the era of the first oligarchs of post-communist Russia, the small group of men who built huge fortunes and achieved enormous political influence in the 1990s.
Charged with tax evasion and fraud, Khodorkovsky faces eight to 10 years in prison if convicted, as his attorneys predict he will be. In their view and the view of many Russians, the prosecution was a successful warning from President Vladimir Putin that political challenges from the super-rich will not be tolerated.
[A notice posted at a Moscow courthouse Wednesday said the verdict, which had been expected on Wednesday, had been postponed until May 16, the Associated Press reported. No reason was given and there was no signature on the printed notice, which was posted inside the glass door of the courthouse.]
The oligarchs were not just the captains of Russian industry, but its generalissimos. By the summer of 1998, just before an economic collapse, about a dozen of them controlled half of the Russian economy. Today, under Putin, they have been exiled, silenced, co-opted or, like Khodorkovsky, imprisoned.
Onetime energy and media magnates Boris Berezovsky and Vladimir Gusinsky are in exile in London. The bankers Vladimir Vinogradov and Alexander Smolensky also live abroad. The metals industrialist Vladimir Potanin has apologized for his role in the privatizations of the 1990s and is now seen as a Kremlin loyalist.
In their place, a new class of prominent businessmen has emerged, politically subservient to, and in some cases drawn from, the Kremlin.
"There are new oligarchs now, Putin's oligarchs," said Olga Kryshtanovskaya, author of "The Anatomy of the Russian Elite" and director of the Russian Academy of Sciences' Center for the Study of Elites. "The Khodorkovsky case has drastically changed the relationship between big business and power. It is now one of dependence and fear."
The wealthiest man in Russia today, Roman Abramovich, seems to spend most his time overseeing the soccer club he bought in London with some of the billions he earned from Siberia's oil fields. Metals and oil oligarch Viktor Vekselberg demonstrated his loyalty by spending $100 million on a set of 180 Faberge eggs, which were displayed at the Kremlin.
When businessmen speak publicly on national issues, Kryshtanovskaya said, it is often to amplify Putin's goal of creating a centralized, powerful state.
"Russia is and always should be an empire state," Mikhail Yuriev, who is chairman of the board of the Evrofinance group and reportedly close to the Kremlin, said in an article in the newspaper Komsomolskaya Pravda last November.
"Those who are saying that we are living in a dictatorship are enemies," he said. "Those who are saying that we cannot put in jail billionaires who want political power because it is bad for the investment climate are enemies. But those who believe in the reorganization of our security services in order to make them more powerful and deadly for the enemy are not enemies."
The Russian news media have reported that Yuriev's company is the leading candidate to take over Ren-TV, the last politically independent TV station in the country. A former member of the reformist party Yabloko, Yuriev is one of a number of businessmen who have refashioned themselves for the political moment. And among those who have risen to new prominence are a group from Putin's home town, St. Petersburg, including bankers Sergei Pugachev and Vladimir Kogan and the oilmen Gennady Timchenko and Yevgeny Malov.
As the Kremlin has reasserted control over key industries, including energy and media, it has also placed Putin confidants in positions of power inside strategic companies.
Two of Putin's closest advisers, who are also rivals for his ear, double up as the heads of two of the country's most important companies. Dmitri Medvedev, the head of the Kremlin administration, is chairman of Gazprom, the natural gas giant. Igor Sechin, the deputy head of administration, is head of Rosneft, the state-controlled company that acquired the Yuganskneftegaz oil fields, the centerpiece of Khodorkovsky's former company, Yukos.
Others serving in the Kremlin also hold prominent business positions. Presidential aide Victor Ivanov is chairman of the board of the missile defense corporation Almaz-Antei; presidential aide Igor Shuvalov is chairman of Russian railways.
"Putin creates people who are very wealthy but dependent on Putin," said Yulia Latynina, a political commentator for the Echo Moskvy radio station. "They don't own these companies and he can fire them without having to go to court or forcibly take away property."
Shortly after assuming power, Putin warned the country's leading businessmen in a meeting that the Kremlin was no longer their instrument and said the state intended to reassert its authority in political life, according to one businessman who attended the meeting. He declined to be identified because he is still in Russia.
By then, Berezovsky and Gusinsky had been forced into exile, but for those who remained, including Khodorkovsky, the bargain was clear: Unless asked, stay out of politics, and the wealth acquired in the buccaneer 1990s will be safe. At the time, the businessman said, it was still unclear where the Kremlin's redlines lay.
Wherever they were, Khodorkovsky was crossing them. He spoke of retiring from Yukos in 2007, the year before Putin's second and final term would end. At the same time, he was giving millions of dollars to private groups and political parties that were seen as opponents of Putin, including Yabloko and the Union of Right Forces. He began to seem like a man with political ambitions.
At a meeting in the Kremlin in February 2003, Putin clashed with Khodorkovsky when the tycoon complained about government corruption. The following October, Khodorkovsky was taken into custody by armed commandos who stormed his private plane on the ground in Siberia. Altogether, more than 20 Yukos executives have been imprisoned or forced into exile.
"We needed to make an example," Igor Shuvalov, a senior Putin aide, said last month in a speech.
But the ascendancy of the bureaucracy over business led to persistent grumbling within the financial community over the last year, particularly among people without access to the top levels of power.
"The government wants to convince business that Yukos is an exception," said Yevgeny Yasin, a former economics minister under Yeltsin and now academic supervisor at the Higher School of Economics in Moscow. "The authorities want to humor business a little. But I think as long as the situation in the country depends on the mood of the president or his colleagues in the Kremlin, business has no reason to trust the future."